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Starting a social enterprise
What is a social enterprise?
A social enterprise is a business that operates to do one or all these things:
- solve a social problem
- improve a community
- support people with employment and training
- help the environment.
A social enterprise can be a small or large business in any industry. It can make a profit or operate as a not-for-profit. Some examples are:
- a cafe creating jobs for young people with barriers to employment
- a gym using profits to subsidise fitness programs for low-income groups
- a retailer selling toilet paper and donating 50% of their profit to charity.
Before you start
Starting a social enterprise can take more time and effort to set up than other business types.
Before you start, work out:
- what the mission of your social enterprise is
- the problem you are trying to solve and how you can solve it
- why you are starting the enterprise
- what funding you'll need.
If you're new to business, it's a good idea to check if you're ready to run a business.
A business plan is essential for setting up a successful business. It can be an important tool when convincing funders or investors to support your project.
It will also help you to identify your legal business structure.
Use our free business plan templates to help you.
Setting up a social enterprise can be more difficult than setting up a regular business. If you're not sure what to do, get help from a business adviser.
1. Develop an impact model
Before you register your business or look for funding, you'll need to develop an impact model. This will outline your social enterprise’s positive impact and how you'll measure it. It can also help you get funding and certification.
To develop your impact model, you'll need to know which model your social enterprise will follow:
- Work focused model – your business gives training, skills and a paid job to people who may find it hard to find work. For example, people with a disability.
- Access model – your business sells or gives access to products or services to meet a community need.
- Redistribution model – your ethical business donates at least 50% of its profit to a charity.
You'll then need to create:
- a clear mission statement
- a plan on how you'll report the impact of your business
- how you will handle any social, cultural, economic and environmental risks to your business.
You can keep this information as a separate document or add it into your business plan.
2. Choose your business structure
Choosing a legal business structure for your social enterprise is the most important decision you’ll make when getting started. This decision impacts the way you can run and fund your business.
In Australia, a social enterprise is not a legal business structure. You’ll need to choose a business structure, such as a company, partnership, co-operative or trust.
Your business structure determines:
- your tax and legal obligations
- your funding and investment options
- if you can make a profit
- who is liable for business debts
- how you make decisions.
Decide if your business is for-profit or not-for-profit
When deciding on a business structure, you'll need to work out if your social enterprise will be set up in a for-profit or not-for-profit (NFP) structure. This decision will impact the way you can run and fund your business.
It's important to understand which business structure is best for your business, so get professional advice before you register.
For-profit social enterprises are businesses that trade to gain a profit. They're often a company or co-operative structure.
There are 2 types of NFP organisations. These are charities and other NFPs, such as a community sporting club.
Legal business structures used by NFP businesses include:
- trusts
- companies
- cooperatives
- incorporated associations
- Indigenous corporations
- unincorporated associations.
Depending on the type of NFP, your organisation may be eligible for a range of tax concessions. Learn more about the legal structures for not-for-profits on the ATO website.
You can combine for-profit and NFP structures. Be sure to get professional business advice before you do this, as it can be complex to set up.
3. Know the type of funding you can get
The type of funding your social enterprise can get depends on your business structure and your for-profit or NFP status.
Common types of funding:
- crowdfunding
- grants
- donations (NFP only)
- social investment bonds
- equity finance (for-profit only)
- debt finance, such as impact investing or commercial loans.
Grants and programs
Social enterprises who give a direct benefit to people experiencing entrenched disadvantage in Australia can apply for the Social Enterprise Capability Building Grant. The grant helps social enterprises:
- grow their business
- scale their impact
- further their mission to support disadvantaged Australians.
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Find out more about the Social Enterprise Capability Building Grant
Funding for social enterprises
You may be eligible to apply for other government business grants. Use our free grant search tool to find the latest government grants, funding and support programs for business.
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Find government grants and programs.
Grants and programs
4. Get certified
In Australia, you don't need to certify your social enterprise to operate. But it can help you:
- get funding
- strengthen your impact model
- market your business
- win social procurement tenders.
There is no government certification. Some popular social enterprise certifications are:
- B Corp
- People and Planet First
- Social Traders.
Read next
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Learn more about business structures
Business structures -
Find more steps to start your business
Guide to starting a business